An Interactive Economic Decision Support Tool for Risk and Return Analysis of Organic Apple Production

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  • 1 Department of Agricultural Economics and Agribusiness, University of Arkansas, Fayetteville, AR 72701

Numerous apple (Malus ×domestica) research experiments have shown that organic apples can be both profitable and sustainable, especially in the Pacific northwestern United States. However, there is limited published research on the profitability of organic apple orchards in the southern U.S. region. Surveys of southern U.S. stakeholders have indicated that great opportunities exist for markets of both fresh and processed fruit, but significant challenges still exist. These challenges include a lack of information available on the economic impacts of different organic production practices and the potential returns available from organic production. In response to these challenges, we developed a user-friendly interactive economic decision support tool using spreadsheet software to simulate organic apple production in Arkansas and across the southern United States. The purpose of this interactive economic decision support tool is 2-fold: 1) to assist producers in the evaluation of costs, returns, and risks associated with their organic apple orchard and 2) to assess changes to cost, return, and risk as expected costs, prices, and/or yields change. The production budget components of the interactive economic decision support tool estimate variable and fixed costs, gross revenues, and net returns for 18 years of production. In addition, this interactive economic decision support tool provides economic analyses regarding: 1) the operation’s breakeven (price and yield) points, 2) sensitivity analyses or “what if” scenarios related to changes in costs and returns, and 3) risk assessment by calculating the probability of obtaining a positive net present value (NPV) over the life of the organic apple orchard. This manuscript describes the development of this interactive economic decision support tool and provides an example of how it works.

Abstract

Numerous apple (Malus ×domestica) research experiments have shown that organic apples can be both profitable and sustainable, especially in the Pacific northwestern United States. However, there is limited published research on the profitability of organic apple orchards in the southern U.S. region. Surveys of southern U.S. stakeholders have indicated that great opportunities exist for markets of both fresh and processed fruit, but significant challenges still exist. These challenges include a lack of information available on the economic impacts of different organic production practices and the potential returns available from organic production. In response to these challenges, we developed a user-friendly interactive economic decision support tool using spreadsheet software to simulate organic apple production in Arkansas and across the southern United States. The purpose of this interactive economic decision support tool is 2-fold: 1) to assist producers in the evaluation of costs, returns, and risks associated with their organic apple orchard and 2) to assess changes to cost, return, and risk as expected costs, prices, and/or yields change. The production budget components of the interactive economic decision support tool estimate variable and fixed costs, gross revenues, and net returns for 18 years of production. In addition, this interactive economic decision support tool provides economic analyses regarding: 1) the operation’s breakeven (price and yield) points, 2) sensitivity analyses or “what if” scenarios related to changes in costs and returns, and 3) risk assessment by calculating the probability of obtaining a positive net present value (NPV) over the life of the organic apple orchard. This manuscript describes the development of this interactive economic decision support tool and provides an example of how it works.

Currently, producers are assigning greater importance to consumer-related fruit quality traits rather than disease resistance traits because of the better understanding of the impact of marketing on production (Yue et al., 2013). In recent years, eating locally grown produce has become increasingly popular (Chamberlain et al., 2013; Denver and Jensen, 2014). Several studies have shown that consumers are willing to pay a premium for locally grown (Bond et al., 2006; Wang et al., 2010; Yue and Tong, 2009) and certified organic food (Bernard and Bernard, 2010; Biing-Hwan et al., 2008; Yue and Tong, 2011). Local farms and small businesses are motivated by these higher price premiums and hence interested in analyzing production cost efficiencies to take advantage of these niche market opportunities (Biing-Hwan et al., 2008; Carpio and Isengildina-Massa, 2009; Yue and Tong, 2011).

The market for organic foods has increased substantially in the last decade (Smith et al., 2009) as has the land dedicated to organic food production [U.S. Department of Agriculture (USDA), 2013a]. For instance, the number of organic certified cropland has increased from 1.22 million acres in 2000 to 3.08 million acres in 2011 (USDA, 2013a). The U.S. Certified Organic Production Survey showed that the value of certified organic sales totaled $3.53 billion in 2011. The top five states—California, Washington, Oregon, Texas, and Wisconsin—accounted for over 62.8% of the total certified organic product value of sales (USDA, 2012).

Although the harvested 13,363 acres of certified organic apples represented only 0.43% of the certified organic cropland acreage in the United States in 2011, certified organic apples represented 3.4% of the total sales ($121.4 million) of all organic produce that year (USDA, 2012). These acres produced 282.2 million pounds of organic apples. Fresh market sales (244.9 million pounds) accounted for $113.7 million, whereas processing sales (37.2 million pounds) accounted for $7.6 million. Washington State accounted for 84.0% of those certified organic apple sales, followed by California (10.2%), Arizona (2.0%), Michigan (1.2%), and Colorado (1.1%). The southern U.S. states lag behind these states in both acres harvested and certified organic apple sales (USDA, 2012).

Peck et al. (2010) reported that a price premium would be needed to offset the higher variable costs of producing disease-resistant apples under an organic fruit production system in the northeastern United States. Mon and Holland (2006) have shown that organic apples can be both profitable and sustainable in the Pacific northwestern United States. However, there is limited published research on organic apple orchard profitability in the southern U.S. region. Surveys of southern U.S. stakeholders indicated that great opportunities exist (e.g., expanding population base in the south, strong tradition of fruit production in the region, strong agricultural heritage, and strong local foods awareness) for markets of both fresh and processed fruit, but significant challenges exist. These challenges include a lack of information available on the economic impacts of different organic production practices and the potential returns available from organic production (Rom et al., 2007).

In response to these challenges, an apple interactive economic decision support tool (AIEDST) was developed to assist producers in making informed decisions regarding organic apple production in the southern United States. The objectives of this manuscript are to 1) describe the development of this interactive economic decision support tool and 2) provide an example of how it works. This example does not represent any particular orchard and is not intended to be a definitive guide of how to grow organic apples. However, it can be helpful in understanding the investment requirements of and potential returns from comparable organic orchards.

Materials and methods

Development of an interactive organic apple budget

A user-friendly AIEDST was developed using spreadsheet software (Excel 2010; Microsoft Corp., Redmond, WA) to simulate organic apple production in the southern United States. This interactive economic decision support tool was designed to represent a 1-acre organic apple orchard using establishment, planting, and production practices information gathered at the Arkansas Agriculture Experiment Station (AAES) located in Fayetteville as default values. This interactive economic decision support tool is both easy to use and to customize.

The AIEDST needs very little user information to calculate cost and revenue streams over the life of the orchard. Navigation is conducted through a series of screens that gather or display detailed information about the current or potential organic apple orchard. The sequence of these screens is as follows: 1) Main menu—this welcome screen provides access to help menus, a complete user guide, and a user input form (Fig. 1). 2) Initial input—orchard information related to cultivar name, planting density, expected yield (pounds per tree), expected production usage (percentage of expected fresh market fruit and percentage of expected processing market fruit), expected market price for each fruit quality (dollars per pound), wages (dollars per hour), and average discount and inflation rates (percentage) are entered. The default values used are presented in Figure 2. “Demo” and “Help” icons are available to assist in completing the form. Once completed, a full budget (dollars per acre) is calculated. 3) Summary output—This screen provides a snapshot of all production activity costs, gross revenues, and net returns for an 18-year life of an orchard. Figure 3 shows this information through year 7 (apple trees are considered mature at this point). From this screen, it is possible to navigate throughout the AIEDST to return to the “Main Menu,” edit the “Initial Input,” view a specific year (e.g., soil preparation, establishment, production year 1), modify information, and view economic analyses (discussed below). 4) Production years input—The AIEDST calculates costs and revenues based on a representative set of activities that occur in any given year on an organic apple orchard. These screens provide a detailed description of the default values for activities and prices (based on AAES farm data and local prices) used to estimate gross revenues and total cost calculations for each year. Figure 4 displays a snapshot of year 3. These default activities, quantities, or prices can be changed to better reflect a producer’s operation. 5) Economic output—This screen presents a graphical representation of the total costs (i.e., variable and fixed costs), gross revenues, and net returns (Fig. 5). Breakeven, sensitivity, and risk analyses can also be accessed from this screen. This screen is explained further in the example below.

Fig. 1.
Fig. 1.

Screen capture of the main menu of the organic apple budget (interactive economic decision support tool). Users can click on the quick start icon to get basic information of how to use the tool; click on the start icon to use the tool, click on the help icon to obtain overall information divided by topics or click on the user guide icon to open a complete guide that covers everything the user needs to know to start using this tool.

Citation: HortTechnology hortte 24, 6; 10.21273/HORTTECH.24.6.757

Fig. 2.
Fig. 2.

Screen capture of the initial user input form of the organic apple budget (interactive economic decision support tool). Here the user enters cultivar name, planting distance (feet), total yield (pounds) per tree, expected percentage usage of fresh fruit, processing fruit and culled fruit, expected market price for fresh fruit and processed fruit (dollars per pound), management and labor wages (dollars per hour), and constant discount and inflation rates (percent). All the information in the gray boxes is required to calculate the budget, except the cultivar name, which is optional. “Demo” and “Help” icons are available to assist in filling the form. By clicking on the “Run” icon, the tool will control if there is missing information. If the initial input was not entered correctly or there is missing information, a warning message asking to correct the data will appear. If there is no missing information and the information has been entered correctly, the application will show a screen with a summary of the budget; 1 ft = 0.3048 m, 1 tree/acre = 2.4711 trees/ha, 1 lb = 0.4536 kg, $1.00/lb = $2.2046/kg.

Citation: HortTechnology hortte 24, 6; 10.21273/HORTTECH.24.6.757

Fig. 3.
Fig. 3.

Screen capture of the summary screen form of the organic apple budget (interactive economic decision support tool). The summary screen is a snapshot of all production activity costs, gross revenues, and net returns for each year. From this screen, the user can navigate across the application. For instance, the user can return to the main menu, edit the initial input, go to a specific year to modify or enter new information, or go to the economics component of this tool; $1.00/acre = $2.4711/ha.

Citation: HortTechnology hortte 24, 6; 10.21273/HORTTECH.24.6.757

Fig. 4.
Fig. 4.

Screen capture of an input screen form (production year 3) of the organic apple budget (interactive economic decision support tool). Navigating to any input screen will reveal detailed descriptions of the variable and fixed costs of production based on the default values used. The user may enter his/her own values by placing new values in the “your quantity” or “your price” columns. Once any new values are entered, calculations are automatically updated. This tool calculates costs and revenues based on a representative set of activities that occur in any given year on an apple orchard; 1 lb = 0.4536 kg, $1.00/lb = 2.2046/kg, 1 ton/acre = 2.2417 Mg·ha−1, $1.00/acre = $2.4711/ha.

Citation: HortTechnology hortte 24, 6; 10.21273/HORTTECH.24.6.757

Fig. 5.
Fig. 5.

Screen capture of the economics screen of the organic apple budget (interactive economic decision support tool). By clicking on the “economics” icon (from any screen), a graphical representation of the gross revenues, total cost of production, net returns, variable, and fixed costs (dollars per acre) associated with the information entered in the “user input” form (Fig. 2) and all the other screens will be displayed. From this screen, breakeven, sensitivity, and risk analyses can be conducted; $1.00/acre = $2.4711/ha, $1.00/lb = $2.2046/kg, 1 lb/acre = 1.1209 kg·ha−1, 1 lb = 0.4536 kg.

Citation: HortTechnology hortte 24, 6; 10.21273/HORTTECH.24.6.757

Economic analyses.

Specific economic assumptions are included in this manuscript, but these assumptions may not fit every production situation as production costs and revenues are highly variable for any particular organic apple operation. Each farm should develop their own budget to reflect their production goals, costs, and market prices. In the example presented in this manuscript, it is assumed that the basic overhead costs of an organic apple orchard, such as land, buildings, organic certifications, and taxes, are covered by the farm business. Only new expenses associated with the production of organic apples are included. However, overhead costs can be added to the AIEDST in the other expenses categories if desired. In this manuscript, it is assumed that producers market apples direct to consumers.

Total costs.

Total costs describe the total economic costs of producing organic apples over 18 years. Total costs are the sum of variable costs plus fixed costs (Baumol and Blinder, 2006). Variable costs vary according to the quantity of yield produced and include inputs such as labor, field operations, harvest, and raw materials. In the AIEDST, variable costs are broken down into 10 categories; fertilizer, harvest, interest on operating capital, labor, nutrient analysis tests, other expenses, pest management, rental of machinery and equipment, supplies, and tree seed stock. Harvest variable costs include the cost of labor and custom work directly associated with harvest. Total variable costs are the cash costs per year required to grow and harvest organic apples.

Fixed costs are independent of yield and include inputs (capital) that cannot be varied in the short term. Fixed costs include depreciation on capital investments in machinery, irrigation equipment, and trellis systems as well as management overhead. These costs do not change as the level of production changes and would be incurred even if organic apples were not produced.

Total costs (dollars per acre) of production are calculated for 1 acre each production year. Total costs for each production year are calculated using the following equation:

DE1

where TCt is the total cost per year t, TFCt is the total fixed cost per year t, and UVCkt are the unit variable costs for activity k for n activities per year t; Q is each activity quantity per year t.

The budget used as the core of this interactive economic decision support tool can be modified for the first 7 years (first 3 years establishment and first 4 years production). Production costs for years 8 and beyond are assumed to be the same than those of year 7 (apple trees are considered mature at this point). These total production costs will be revisited in the risk analysis below.

Gross revenues.

Gross revenues are estimated by multiplying expected market price (dollars per pound) for each fruit quality (e.g., fresh market fruit or processing market fruit) and expected yield (pounds per acre) for each fruit quality (e.g., fresh market fruit or processing market fruit) for each year of production. Annual gross revenues of production are calculated for 1-acre each production year t using the following equation:

DE2

where GR is the expected gross revenues per year t, YEFM is the expected yield to be sold in the fresh market in year t, PEFM is the expected price to be received for fresh market fruit in year t, YEPM is the expected yield to be sold in the processing market in year t, and PEPM is the expected price to be received for processing fruit in year t. Expected yields for each fruit quality are estimated as follows:

DE2_1
DE2_2

where TY is the expected total yield per year t, EFM is the expected percentage of fresh market fruit produced in year t, EPM is percentage of processed market fruit produced in year t, and TA is the total number of trees per acre. All these yield values are input that the user needs to enter and can be modified or changed at any time. It is important to point out that there will always be some percentage of culls or drops. In this analysis, this value is assumed to be 10%. However, the AIEDST allows the user to enter expected fresh market and processed market percentages for each year of production. These two percentages must be equal to 100% or less each year. If the total of both percentages is greater than 100%, a message will appear asking to correct the input. If the total of both percentages is less than 100%, it is assumed that the difference is culled fruit.

Net returns.

Net returns (dollars per acre) are estimated each year by subtracting total cost (dollars per acre) from gross revenues (dollars per acre).

Net returns for each production year t (NRt) are calculated using the following equation:

DE3

Future values.

The AIEDST could be used by a producer to estimate costs and revenues across the life of an orchard before determining whether to undertake the operation. As a result, all future costs and revenues are unknown. One way to estimate the values of costs and revenues that occur in the future is to increase current values annually by an expected inflation rate using the following equation:

DE4

where FV is future cash flows occurring at time t, PV is the present value (explained below), and I is the inflation rate in decimal form.

Present values.

Present value is a future amount of money that has been discounted (using an average discount rate) to reflect its current value, as if it existed today. Present value calculations are used to make comparisons between cash flows and production years, as they do not occur at simultaneous times (Baumol and Blinder, 2006). The soil preparation year is assumed as the starting year (t = 0). After this year, all the calculations are adjusted by the average discount rate to estimate present values. Present values for variable and fixed costs, gross revenues, and net returns were estimated using the following equation:

DE5

where PV is the present value of future cash flows (FV) occurring at time t, that must be discounted over the course of n years using d, the discount rate.

Net present value was used to estimate the profitability of an organic apple orchard that lasts 18 years (3 years to establishment, 15 years in production) as annual net returns (gross revenue – total costs) are discounted to the present. Hence, the PV of future net returns received over the life of the orchard represents the sum total of profitability expressed in today’s dollars for making the decision to invest in the orchard:

DE6

where NPV is the net present value, NR is the net returns, t is time period, and d is the discount rate for one compounding period (in this case, annually).

The inflation rate (i) is used to adjust the value of future cash flows. Then the discount rate (d) is used to determine the PV of future cash flows. Both of these rates are entered by the user and can be updated at any time. Note that year 0 is included to represent cash flows occurred in the soil preparation year that need not be discounted. The PV of net returns or NPV is used in the risk assessment component of the AIEDST. The larger the NPV, the better is the investment (Baumol and Blinder, 2006). Given our assumptions, a negative NPV implies that total costs cannot be covered using revenue streams generated by the orchard.

Breakeven analysis.

Although obtaining positive NPV is the main goal, it is often important to know if/when the production of the organic apple orchard will just cover the total costs of production or breakeven. It is also important to know the payback period, which is the time it takes to breakeven. The breakeven point can be calculated by determining the yields needed to generate sufficient revenue to cover total costs holding all else constant. The same can be done to determine the market price for fresh and processed apples holding yields constant. The AIEDST calculates how much revenue is needed and how many years it takes to get that amount of revenue (given expected fresh and processed market yields and prices) to cover the total costs of production. Hence the breakeven point is defined as the dollar value at which the PV of total costs is equal to the PV of gross revenues (Albright et al., 2006). Finally, the tool also calculates the amount of time needed from the start of the project until discounted inflows begin to exceed discounted outflows. This point in time is known as the payback period, and the sooner this breakeven year is reached, the more desirable the investment. This point is reached when cumulative gross revenue is equal to cumulative total cost.

To calculate these breakeven points, it is necessary to estimate: 1) cumulative total costs Eq. [1] and gross revenue Eq. [2] summed and discounted over the life of the orchard, and 2) expected revenue (e.g., expected market production) for each fruit quality Eq. [7]. Expected revenue (MRjt) is equal to expected market yield (Yjt) per acre (e.g., yield per tree × number of trees per acre) times expected market price (Pjt); where j represents either the fresh or processed market fruit (see Eq. [7]).

DE7

So, the breakeven yield (BEY) is calculated by dividing the cumulative total costs of operating the orchard for 18 years Eq. [1] by the expected average market price (Pj) over the life of the orchard times the ratio between expected revenue Eq. [7] and total gross revenues Eq. [2]. Hence the breakeven price for fresh and processed fruit is calculated by allocating total costs on the basis of revenue generated in each market as follows:

DE8

Likewise, the breakeven price (BEP) is calculated by replacing Pjt with the expected average market yield (Yjt) over the life of the orchard in Eq. [8]. The resulting values will be the average annual price per pound (for each quality) that must be attained for apples to breakeven over the course of 18 years of production (3 years to establishment, 15 years in production). All these values are updated automatically if any input is changed (e.g., yields, market prices, management and labor wages, inflation and discount rates, etc.) and, hence, changes to yield or price expectations can be used to conduct sensitivity or what-if analyses.

Sensitivity analysis.

A sensitivity analysis (or “what-if” analysis) is a technique used to determine how different values of an input will affect the final product (Albright et al., 2006). The AIEDST enables the producer to instantly see the effect of a change in one or more of the inputs on the economic feasibility of the organic apple orchard to make better planning and investing decisions. For instance, the producer might like to know how the total costs, gross revenues, and net returns will be affected if a change occurs (e.g., unexpected lower/higher yields, lower/higher prices, or both). Once the desired values have been changed, the tool will calculate new values for gross revenues and net returns. A graphical representation of both scenarios is displayed side by side to facilitate comparisons.

Risk analysis.

In addition to a sensitivity analysis, the AIEDST includes a risk analysis component that simulates the effects of production and price risks. Risk analysis is defined here as a technique that calculates the probability of obtaining a NPV greater than a specific dollar target (Albright et al., 2006). The producer can set this target. The AIEDST needs information on “minimum,” “most likely,” and “maximum” yield (pounds per tree) and price (dollars per pound) for each fruit quality for each year of production to use them as the parameters of a triangular distribution. The decision support tool’s default values will be used for calculation if full production yield and price values are not updated. Once the risk analysis input information is recorded, the AIEDST will calculate stochastic NPVs for the orchard using the probability density functions for the price and yield distributions entered and simulating returns 100 times each year assuming a triangular distribution. From these simulations, the likelihood of NPV exceeding a specific dollar target can be calculated. It also calculates the range of NPV and graphically displays the distribution.

Using the tool—an example.

Default values for important variables are presented in Tables 13 . For this example, a hypothetical 1-acre organic apple orchard has been established in northwestern Arkansas. It is assumed that before planting, the site had not been used for several years. The area was leveled and graded to improve drainage and access to the site. The soil was tilled following the application of horse manure. Incorporation of lime at a rate of 1.5 tons/acre is applied to adjust soil pH. Horse manure is applied at a rate of 2 tons/acre to increase soil fertility. The AIEDST assumes that the lifespan of the orchard is 18 years. For instance, it takes 3 years to establish the orchard and the orchard is expected to be in production for 15 years (C.R. Rom, unpublished data).

Table 1.

Summary of expected total yield of a generic organic apple cultivar in pounds per tree and pounds per acre used as default values for 1 acre (0.4 ha) [606 trees/acre (1497.5 trees/ha), 6 × 12 ft (1.8 × 3.7 m)] for fresh market fruit (80% of the total yield) and processing market fruit (10% of the total yield) over 15-year productive life of an orchard.

Table 1.
Table 2.

Default constant market prices and wage costs values for a generic organic apple cultivar for each year of production for 1 acre (0.4 ha) over 15-year productive life of an orchard.

Table 2.
Table 3.

Risk analysis expected yield and price default values (baseline scenario) for 1 acre (0.4 ha) [606 trees/acre (1497.5 trees/ha), 6 × 12 ft (1.8 × 3.7 m)] for fresh market fruit (80% of the total yield) and processing market fruit (10% of the total yield) over 15-year productive life of an organic apple orchard assuming a target amount of $90,000/acre ($222,394.8/ha)z per acre over the entire life of the orchard, discount rate of 7.0% and inflation rate of 1.5%y.

Table 3.

Establishment and planting conditions were assumed to be very similar to those reported by Choi et al. (2011) and Rom et al. (2008, 2010). For instance, a disease-resistant apple cultivar Enterprise was chosen for this study. Trees were grafted onto ‘M.26’ dwarfing rootstock. Irrigation included rotary sprinklers suspended from a drip line between trees. Trees were planted 6 ft between trees and 12 ft between rows for an approximate density of 606 trees/acre in a vertical axis training system. Trees were trained to a 12-ft-tall vertical axis with a two-wire trellis system for tree support and training. The row middles were seeded with tall fescue (Festuca arundinacea) cultivar K-31 and winter wheat (Triticum aestivum) nursery to minimize soil erosion and suppress weeds.

The AIEDST allows for two fruit qualities: fresh market and processing. Fresh market fruit is perfect fruit, free from damage caused by disease, insects, hail, fruit russet, etc. Processed fruit includes all the apples that are marketable but have blemishes, but not rotten; typically includes insect stings, fruit russet, and misshapen fruit (USDA, 2002). According to Slattery et al. (2011), U.S. apple producers sell their lower quality apples to processors at lower prices and sell their higher quality apples for fresh market consumption at higher prices. A profit-maximizing producer would want to sell 100% his/her production in the fresh market. However, since fruit quality variations is normal and expected, it is assumed that the greater percentage of production (≈80%) will be sold in the fresh market and the lesser amount in the processing market (≈10%). There will always be some percentage (here assumed to be ≈10%) of culls or drops (C.R. Rom, unpublished data).

Default marketable yields were based on estimates from the Economic Research Service (USDA, 2013b). The expectation for organic production should be a yield similar to conventional production (Reganold et al., 2001). The reported national average conventional apple yield in 2010 was 26,900 lb/acre (USDA, 2013b). The default yield value used in this tool is 45 lb/tree per year and hence the total yield per acre in this example was estimated to be 27,225 lb/acre per year, with 80% (21,780 lb/acre) delivered to the fresh market and 10% (2723 lb/acres) delivered to the processing market. The 10% culled fruit was not included, as it did not have any economic value.

Starting in year 7 (production year 4—apple trees are considered mature at this point), it was assumed organic apples would be harvested for sale. The weekly national fruit and vegetable retail report (10 Jan. 2014) was chosen as the starting prices for organic apple to be sold in the fresh market and for processing usage (USDA, 2014a). The average wholesale price for fresh organic apples used as default in this example is $1.00/lb and $0.15/lb for processing fruit. These prices are representative of the south-central United States (USDA, 2014a). However, a range of fresh market prices (e.g., $0.50/lb to $2.00/lb) are used in the sensitivity analysis to show the tool’s flexibility to allow changes in prices to reflect different marketing venues (e.g., direct market). It is expected that most producers in the southeastern United States would be interested in the direct market; the authors of this manuscript are not aware of any packinghouses in the southern United States for organic apples.

Once the initial costs and revenues were calculated, three additional types of analyses were conducted. First, two types of breakeven analyses were conducted: the year and dollar amount needed to breakeven for seven fresh market prices ranging from $0.70/lb to $1.30/lb and the breakeven yield needed for the range of fresh market prices. Second, sensitivity analyses were also conducted to assess expected NPV for 495 combinations of prices, yield, and fresh/processing market sales of apples. Third, risk analyses estimated the probability of obtaining a NPV equal or greater than $90,000 per acre over the full life of the orchard.

Results and discussion

Under the assumptions used in this example, a producer would incur a capital investment of over $21,700 per acre distributed in the first 3 years (soil preparation, establishment, and maintenance) and have recurring expenses ranging from $3600 to $7600 per acre per year for the next 15 years of production to establish and cover the annual costs of this example organic apple orchard (Table 4).

Table 4.

Expected present values of variable costs, fixed costs, total costs, gross revenues and net returns for organic apple assuming a constant total yield of 45 lb (20.4 kg) per tree (80% fresh market and 10% processing market) each year and a constant price of $1.00/lb ($2.205/kg) for fresh fruit and $0.15/lb ($0.331/kg) for processing fruit.

Table 4.

Variable or cash costs comprise 62% of total costs, whereas fixed costs comprise 38%. Almost three-quarters of the variable costs are represented by two categories: pest management (44%) and labor (29%). Labor in this case includes labor for harvest. These two categories represent 45% of the total cost of production during the entire life of the orchard. Machinery, irrigation, and trellis systems represented 63% of the fixed costs while management overhead accounted for the remaining 37%.

Breakeven analysis.

Table 5 displays the summary of the seven breakeven yield analyses for the 18-year period assuming 80%/10% fresh/processed market sales and constant prices each year for fresh market prices (ranging from $0.70/lb to $1.30/lb) and a constant processed market price of $0.15/lb each year. The lower the price received for fresh market fruit, the higher the expected yield needed to breakeven after 18 years of production.

Table 5.

Summary of expected breakeven yield points for 1 acre (0.4 ha) of a generic organic apple cultivar assuming a constant total yield of 45 lb/tree per year with 80% of the fruit sold in the fresh market and 10% in the processing market; for different fresh market prices and a constant average price of $0.15/lb each year for fruit sold in the processing marketz.

Table 5.

The higher the price received for the fresh market fruit, the sooner the apple orchard will breakeven (Table 6). In this example, with a constant price of $1.10/lb or higher and a constant yield of 45 lb/tree per year, the orchard will breakeven after 7 years of production or when the cumulative present value of total gross revenues were equal to the present value of total costs of $50,002 per acre. In contrast, with a constant price of $0.70/lb each year, payback will not occur until year 14.

Table 6.

Summary of years to breakeven for different fresh market prices assuming a constant yield of 45 lb (20.4 kg) per tree per year with 80% of the fruit sold in the fresh market and 10% in the processing market; and a constant average price of $0.15/lb each year for fruit sold in the processing market.

Table 6.

The AIEDST can also estimate the breakeven yields, prices, and payback periods under user-specified conditions (Fig. 6). For instance, using the tool’s default values (Tables 13), the orchard will breakeven after 18 years of production, if fresh market and processed market yields over the life of the orchard are at least 104,200 lb/acre (11.64 lb/tree per year) and 13,205 lb/acre (1.43 lb/tree per year), respectively. Likewise, the breakeven prices for fresh market and processed markets are at least $0.34/lb and $0.05/lb each year, respectively.

Fig. 6.
Fig. 6.

Screen capture of the breakeven analysis screen of the organic apple budget (interactive economic decision support tool); $1.00/lb = $2.2046/kg, 1 lb/acre = 1.1209 kg·ha−1, $1.00/acre = $2.4711/ha.

Citation: HortTechnology hortte 24, 6; 10.21273/HORTTECH.24.6.757

Sensitivity analysis.

A per-acre summary of the 18-year NPV for different yield, production usage (i.e., fresh market and processing market), and prices are presented in Tables 710 . As expected, NPV varies depending on the expected yield per tree and price per pound. 66% of the 576 different yield and price combinations presented in Tables 710 are positive. The lower the percentage of fruit sold in the fresh market, the higher the market price needed to produce positive NPV. If, for example, each organic apple tree produces 45 lb/tree per year and only 50% of the total yield is sold in the fresh market, each pound of organic apple needs to be sold at least at $1.10/lb each year to breakeven (Table 7). If, for example, each organic apple tree produces 45 lb/tree per year and 80% of the total yield is sold in the fresh market, each pound of organic apple needs to be sold at least at $0.70/lb each year to breakeven (Table 10). None of the combinations with prices lower than $0.70/lb each year and total yield less than 40 lb/tree covered establishment and production cost during the entire life of the orchard.

Table 7.

Expected present values of net returns for different apple yields and prices per pound; assuming 50% of the total yield is sold in the fresh market and 10% in the processing market. A constant price of $0.15/lb of organic apple for the processing market was assumed for the 15-year productive life of the orchard.

Table 7.
Table 8.

Expected present values of net returns for different apple yields and prices per pound; assuming 60% of the total yield is sold in the fresh market and 10% in the processing market. A constant price of $0.15/lb of organic apple for the processing market was assumed for the 15-year productive life of the orchard.

Table 8.
Table 9.

Expected present values of net returns for different apple yields and prices per pound; assuming 70% of the total yield is sold in the fresh market and 10% in the processing market. A constant price of $0.15/lb of organic apple for the processing market was assumed for the 15-year productive life of the orchard.

Table 9.
Table 10.

Expected present values of net returns for different apple yields and prices per pound; assuming 80% of the total yield is sold in the fresh market and 10% in the processing market. A constant price of $0.15/lb of organic apple for the processing market was assumed for the 15-year productive life of the orchard.

Table 10.

However, positive NPV is somewhat meaningless unless compared with alternative uses for the land employed for the orchard. For example, when each tree in an acre produces 45 lb/tree per year and 80% of the total yield is sold in the fresh market for $0.70/lb each year (Table 10), a total of only $7315 per acre is generated over the life of the orchard. This is only $406 per acre per year. Producers must compare the opportunity costs of several mutually exclusive production alternatives to the expected net returns to truly determine whether the operation is feasible under uncertain yield, price and market allocation conditions. Economic feasibility is described in the risk analysis section.

Risk analysis.

This risk analysis complements the sensitivity analysis because it allows increasing/decreasing the present value of total costs of production by 1% increments. For instance, if the producer expects that the present value of total costs of production is underestimated or overestimated in the tool, the user can adjust the total cost values without changing any specific input in the budget.

In the example, the present value of total costs is estimated to be $107,746 per acre. Table 11 shows how an increase or decrease in those estimated costs can impact expected range of net returns, as well as the likelihood of reaching a NPV of $90,000 per acre when it is assumed that 80% of the total yield is sold in the fresh market and fresh market price received by pound will fluctuate from $0.50/lb to $2.00/lb using a triangular distribution. The probability of obtaining a NPV of $90,000 per acre using default values (baseline—example scenario) and a comparison scenario assuming that total costs per acre are 30% less than the baseline scenario (This task was performed by using a sensitivity analysis to increase/decrease the default total costs by 5% increments) is displayed in Fig. 7.

Table 11.

Risk analysis output for 100 simulated present values of net returns ($/acre) at different total costs percentage variations for the 15-year productive life of the orchard.

Table 11.
Fig. 7.
Fig. 7.

Screen capture of the risk analysis screen of the organic apple budget (interactive economic decision support tool). The baseline scenario assumes a constant yield of 45 lb (20.4) per tree each year with 80% of the fruit sold in the fresh market, 10% in the processed market, and 10% being culled. The mostly likely average prices are assumed to be $1.00/lb (fresh fruit) and $0.15/lb (processed fruit); $1.00/lb = $2.2046/kg. The total cumulative costs are $107,746/acre and the target net returns during the lifetime of the orchard are $90,000/acre. The probability of obtaining a value equal or greater than the target net return (baseline) during the life of the operation is 60.61%. There is a 95% chance that the true net present average lies between $90,797 and $97,686 per acre. The comparison scenario was estimated assuming the total costs of production was 30% less than the baseline; $75,422/acre; $1.00/acre = $2.4711/ha.

Citation: HortTechnology hortte 24, 6; 10.21273/HORTTECH.24.6.757

In this example, under the initial present value of total cost calculations, there is a 60.61% probability of generating $90,000 per acre or more during the entire life of the orchard. Further, given the range of fresh market prices that are randomly drawn 100 times, the range of NPV lies between $90,797 and $97,689 per acre. Because this range of prices does not cover all likely prices, Figure 7 suggests that NPV will lie in this range 95% of the time.

The probability of obtaining a NPV greater than $90,000 per acre for the entire life of the orchard will decrease from 60.61% to 11.11% if total costs are 30% greater ($140,070 per acre) than initially estimated. Conversely, if total costs are assumed to be 30% less than the initial estimate ($75,422 per acre) the likelihood of exceeding $90,000 per acre NPV increases to 97% as the low end of expected NPV is $116,604 per acre (Table 11).

Conclusions

We developed a user-friendly interactive economic decision support tool using spreadsheet software to simulate organic apple production in Arkansas and across the southern United States. This interactive economic decision support tool is designed to allow the informed user to model implications of cost, yield, and price changes on net return expectations. Default values from real organic apple orchards are used for soil preparation, establishment, and planting information gathered at the AAES located in Fayetteville, AR.

The production budget components of the AIEDST estimate variable and fixed costs, gross revenues, and net returns for 18 years of production using the tool’s default data, information entered by the user or a combination of both. However, this interactive economic decision support tool is superior to traditional production budgets because it includes additional economic analyses as it: 1) estimates the operation’s breakeven (price and yield) points, 2) conducts sensitivity analyzes (answering “what if” questions related to changes in costs and returns), and 3) provides a risk assessment of the probability of obtaining targeted NPV.

To avoid drawing unfounded conclusions for any particular organic apple orchard, users of the AIEDST must closely examine the economic assumptions made in each of the input screens, and then adjust the costs (i.e., production activities, units, quantities, costs, and prices) and/or returns as appropriate for their operation. The example presented in this manuscript does not represent any particular orchard and is not intended to be a definitive guide of how to grow organic apples. However, it can be adjusted to reflect individual production situations.

Each apple orchard producer should develop their own budget to reflect their production goals, total costs and expected market prices. Fluctuations in prices which are influenced by market supply and demand are a major risk factor. As shown in Tables 710, the profitability of the analyzed orchard is determined by expected yields and prices. Producers must be very conservative in assessing net returns when establishing production or financial plans. Factors such as total production acreages, market demand, marketing costs, organic certifications and regulations (e.g., Food Safety Modernization Act) must be considered when making price predictions. It is expected that an increase in organic production and the consolidation of organic markets will lead to a general decline in the overall price for organic apples.

Although the information provided in this manuscript does not represent any particular organic apple orchard, it can be helpful in estimating the physical and financial requirements of comparable organic orchards since the AIEDST provides economic tools such as breakeven, sensitivity, and risk analyses. These economic tools will help existing and new organic apple producers to evaluate production and marketing decisions, determine potential returns, prepare budgets, and compare different scenarios.

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Literature cited

  • Albright, S.C., Winston, W.L. & Zappe, C.J. 2006 Data analysis and decision making with Microsoft Excel. 3rd ed. Thomson South-Western, Taunton, MA

  • Baumol, W.J. & Blinder, C.I. 2006 Economics principles and policy. 10th ed. Thomson South-Western, Kendallville, IN

  • Bernard, J.C. & Bernard, D.J. 2010 Comparing parts with the whole: Willingness to pay for pesticide-free, non-GM, and organic potatoes and sweet corn J. Agr. Resource Econ. 35 457 475

    • Search Google Scholar
    • Export Citation
  • Biing-Hwan, L., Smith, T.A. & Huang, C.L. 2008 Organic premiums of US fresh produce Renew. Agr. Food Syst. 23 208 216

  • Bond, J.K., Thilmany, D. & Bond, C.A. 2006 Direct marking of fresh produce: Understanding consumer purchasing decisions Choices Mag. 21 229 236

  • Carpio, C.E. & Isengildina-Massa, O. 2009 Consumer willingness to pay for locally grown products: The case of South Carolina Agribusiness 25 412 426

    • Search Google Scholar
    • Export Citation
  • Chamberlain, A.J., Kelley, K.M. & Hyde, J. 2013 Locally grown and certified organic produce in the mid-Atlantic region of the United States HortTechnology 23 74 81

    • Search Google Scholar
    • Export Citation
  • Choi, H.S., Rom, C.R. & Gu, M. 2011 Plant performance, and seasonal soil and foliar nutrient variations in an organic apple orchard under four ground cover management systems J. Amer. Pomol. Soc. 65 66 82

    • Search Google Scholar
    • Export Citation
  • Denver, S. & Jensen, J.D. 2014 Consumer preferences for organically and locally produced apples Food Qual. Prefer. 31 129 134

  • Mon, P.N. & Holland, D.W. 2006 Organic apple production in Washington State: An input–output analysis Renew. Agr. Food Syst. 21 134 141

  • Peck, G.M., Merwin, I.A., Brown, M.G. & Agnello, A.M. 2010 Integrated and organic fruit production systems for ‘liberty’ apple in the northeast United States: A systems-based evaluation HortScience 45 1038 1048

    • Search Google Scholar
    • Export Citation
  • Reganold, J.P., Glover, J.D., Andrews, P.K. & Hinman, H.R. 2001 Sustainability of three apple production systems Nature 410 926 930

  • Rom, C.R., Friedrich, H. & McAfee, J. 2007 Organic fruit production: Challenges and opportunities for research and outreach Acta Hort. 737 147 154

  • Rom, C.R., Garcia, M.E., McAfee, J., Friedrich, H., Choi, H.S., Johnson, D.T., Popp, J. & Savin, M. 2010 The effects of groundcover management and nutrient source during organic orchard establishment Acta Hort. 873 105 114

    • Search Google Scholar
    • Export Citation
  • Rom, C.R., McAfee, J., Friedrich, H., Choi, H.S., Garcia, M.E., Johnson, D., Popp, J. & Savin, M. 2008 Early performance during establishment of an organic apple orchard in the upper mid-south HortScience 43 609. (abstr.)

    • Search Google Scholar
    • Export Citation
  • Slattery, E., Livingston, M., Greene, C. & Klonsky, K. 2011 Characteristic of conventional and organic apple production in the United States. U.S. Dept. Agr. Econ. Res. Serv. FTS-347-01. 7 Jan. 2014. <http://www.ers.usda.gov/media/118496/fts34701.pdf>

  • Smith, T.A., Huang, C.L. & Lin, B.H. 2009 Does price or income affect organic choice? Analysis of U.S. fresh produce users J. Agr. Appl. Econ. 41 731 744

    • Search Google Scholar
    • Export Citation
  • U.S. Department of Agriculture 2002 United States standards for grades of apples. 8 Jan. 2014. <http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5050339>

  • U.S. Department of Agriculture 2012 2011 Certified organic production survey. 27 Jan. 2014. <http://usda01.library.cornell.edu/usda/current/OrganicProduction/OrganicProduction-10-04-2012.pdf>

  • U.S. Department of Agriculture 2013a Organic production: Table 3. Certified organic and total U.S. acreage, selected crops and livestock, 1995-2011. 28 Jan. 2014. <http://www.ers.usda.gov/Data/Organic>

  • U.S. Department of Agriculture 2013b U.S. apple statistics: Table 7 - Yield per apple bearing area in the United States, by State, 1980-2010. 19 Dec. 2013. <http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1825>

  • U.S. Department of Agriculture 2014a Advertised prices for fruits & vegetables at major retail supermarket outlets. 01/04 to 01/16. 10 Jan. 2014. <http://www.ams.usda.gov/mnreports/fvwretail.pdf>

  • U.S. Department of Agriculture 2014b Price indexes and discount rates: Use of the discount rate in conservation programs and projects. 28 July 2014. <http://www.nrcs.usda.gov/wps/PA_NRCSConsumption/download?cid=stelprdb1257183&ext=pptx>

  • U.S. Department of Labor 2014 News release – Consumer price index – Dec. 2013. USDL-14-0037. 23 Jan. 2014. <http://www.bls.gov/news.release/pdf/cpi.pdf>

  • Wang, Q., Sun, J. & Parsons, R. 2010 Consumer preferences and willingness to pay for locally grown organic apples: Evidence from a conjoint study HortScience 45 376 381

    • Search Google Scholar
    • Export Citation
  • Yue, C., Gallardo, R.K., Luby, J., Rihn, A., McFerson, J.R., McCracken, V., Bedford, D., Brown, S., Evans, K., Weebadde, C., Sebolt, A. & Iezzoni, A.G. 2013 An investigation of U.S. apple producers’ trait prioritization: Evidence from audience surveys HortScience 48 1378 1384

    • Search Google Scholar
    • Export Citation
  • Yue, C. & Tong, C. 2009 Organic or local? Investigating consumer preference for fresh produce using a choice experiment with real economic incentives HortScience 44 366 371

    • Search Google Scholar
    • Export Citation
  • Yue, C. & Tong, C. 2011 Consumer preferences and willingness to pay for existing and new apple varieties: Evidence from apple tasting choice experiments HortTechnology 21 376 383

    • Search Google Scholar
    • Export Citation

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Contributor Notes

Funding for this research was provided by the Southern Sustainable Agriculture Research and Education Program Grant and the U.S. Department of Agriculture, Organic Agriculture Research and Extension Initiative.

Corresponding author. E-mail: hrodrig@uark.edu.

  • View in gallery

    Screen capture of the main menu of the organic apple budget (interactive economic decision support tool). Users can click on the quick start icon to get basic information of how to use the tool; click on the start icon to use the tool, click on the help icon to obtain overall information divided by topics or click on the user guide icon to open a complete guide that covers everything the user needs to know to start using this tool.

  • View in gallery

    Screen capture of the initial user input form of the organic apple budget (interactive economic decision support tool). Here the user enters cultivar name, planting distance (feet), total yield (pounds) per tree, expected percentage usage of fresh fruit, processing fruit and culled fruit, expected market price for fresh fruit and processed fruit (dollars per pound), management and labor wages (dollars per hour), and constant discount and inflation rates (percent). All the information in the gray boxes is required to calculate the budget, except the cultivar name, which is optional. “Demo” and “Help” icons are available to assist in filling the form. By clicking on the “Run” icon, the tool will control if there is missing information. If the initial input was not entered correctly or there is missing information, a warning message asking to correct the data will appear. If there is no missing information and the information has been entered correctly, the application will show a screen with a summary of the budget; 1 ft = 0.3048 m, 1 tree/acre = 2.4711 trees/ha, 1 lb = 0.4536 kg, $1.00/lb = $2.2046/kg.

  • View in gallery

    Screen capture of the summary screen form of the organic apple budget (interactive economic decision support tool). The summary screen is a snapshot of all production activity costs, gross revenues, and net returns for each year. From this screen, the user can navigate across the application. For instance, the user can return to the main menu, edit the initial input, go to a specific year to modify or enter new information, or go to the economics component of this tool; $1.00/acre = $2.4711/ha.

  • View in gallery

    Screen capture of an input screen form (production year 3) of the organic apple budget (interactive economic decision support tool). Navigating to any input screen will reveal detailed descriptions of the variable and fixed costs of production based on the default values used. The user may enter his/her own values by placing new values in the “your quantity” or “your price” columns. Once any new values are entered, calculations are automatically updated. This tool calculates costs and revenues based on a representative set of activities that occur in any given year on an apple orchard; 1 lb = 0.4536 kg, $1.00/lb = 2.2046/kg, 1 ton/acre = 2.2417 Mg·ha−1, $1.00/acre = $2.4711/ha.

  • View in gallery

    Screen capture of the economics screen of the organic apple budget (interactive economic decision support tool). By clicking on the “economics” icon (from any screen), a graphical representation of the gross revenues, total cost of production, net returns, variable, and fixed costs (dollars per acre) associated with the information entered in the “user input” form (Fig. 2) and all the other screens will be displayed. From this screen, breakeven, sensitivity, and risk analyses can be conducted; $1.00/acre = $2.4711/ha, $1.00/lb = $2.2046/kg, 1 lb/acre = 1.1209 kg·ha−1, 1 lb = 0.4536 kg.

  • View in gallery

    Screen capture of the breakeven analysis screen of the organic apple budget (interactive economic decision support tool); $1.00/lb = $2.2046/kg, 1 lb/acre = 1.1209 kg·ha−1, $1.00/acre = $2.4711/ha.

  • View in gallery

    Screen capture of the risk analysis screen of the organic apple budget (interactive economic decision support tool). The baseline scenario assumes a constant yield of 45 lb (20.4) per tree each year with 80% of the fruit sold in the fresh market, 10% in the processed market, and 10% being culled. The mostly likely average prices are assumed to be $1.00/lb (fresh fruit) and $0.15/lb (processed fruit); $1.00/lb = $2.2046/kg. The total cumulative costs are $107,746/acre and the target net returns during the lifetime of the orchard are $90,000/acre. The probability of obtaining a value equal or greater than the target net return (baseline) during the life of the operation is 60.61%. There is a 95% chance that the true net present average lies between $90,797 and $97,686 per acre. The comparison scenario was estimated assuming the total costs of production was 30% less than the baseline; $75,422/acre; $1.00/acre = $2.4711/ha.

  • Albright, S.C., Winston, W.L. & Zappe, C.J. 2006 Data analysis and decision making with Microsoft Excel. 3rd ed. Thomson South-Western, Taunton, MA

  • Baumol, W.J. & Blinder, C.I. 2006 Economics principles and policy. 10th ed. Thomson South-Western, Kendallville, IN

  • Bernard, J.C. & Bernard, D.J. 2010 Comparing parts with the whole: Willingness to pay for pesticide-free, non-GM, and organic potatoes and sweet corn J. Agr. Resource Econ. 35 457 475

    • Search Google Scholar
    • Export Citation
  • Biing-Hwan, L., Smith, T.A. & Huang, C.L. 2008 Organic premiums of US fresh produce Renew. Agr. Food Syst. 23 208 216

  • Bond, J.K., Thilmany, D. & Bond, C.A. 2006 Direct marking of fresh produce: Understanding consumer purchasing decisions Choices Mag. 21 229 236

  • Carpio, C.E. & Isengildina-Massa, O. 2009 Consumer willingness to pay for locally grown products: The case of South Carolina Agribusiness 25 412 426

    • Search Google Scholar
    • Export Citation
  • Chamberlain, A.J., Kelley, K.M. & Hyde, J. 2013 Locally grown and certified organic produce in the mid-Atlantic region of the United States HortTechnology 23 74 81

    • Search Google Scholar
    • Export Citation
  • Choi, H.S., Rom, C.R. & Gu, M. 2011 Plant performance, and seasonal soil and foliar nutrient variations in an organic apple orchard under four ground cover management systems J. Amer. Pomol. Soc. 65 66 82

    • Search Google Scholar
    • Export Citation
  • Denver, S. & Jensen, J.D. 2014 Consumer preferences for organically and locally produced apples Food Qual. Prefer. 31 129 134

  • Mon, P.N. & Holland, D.W. 2006 Organic apple production in Washington State: An input–output analysis Renew. Agr. Food Syst. 21 134 141

  • Peck, G.M., Merwin, I.A., Brown, M.G. & Agnello, A.M. 2010 Integrated and organic fruit production systems for ‘liberty’ apple in the northeast United States: A systems-based evaluation HortScience 45 1038 1048

    • Search Google Scholar
    • Export Citation
  • Reganold, J.P., Glover, J.D., Andrews, P.K. & Hinman, H.R. 2001 Sustainability of three apple production systems Nature 410 926 930

  • Rom, C.R., Friedrich, H. & McAfee, J. 2007 Organic fruit production: Challenges and opportunities for research and outreach Acta Hort. 737 147 154

  • Rom, C.R., Garcia, M.E., McAfee, J., Friedrich, H., Choi, H.S., Johnson, D.T., Popp, J. & Savin, M. 2010 The effects of groundcover management and nutrient source during organic orchard establishment Acta Hort. 873 105 114

    • Search Google Scholar
    • Export Citation
  • Rom, C.R., McAfee, J., Friedrich, H., Choi, H.S., Garcia, M.E., Johnson, D., Popp, J. & Savin, M. 2008 Early performance during establishment of an organic apple orchard in the upper mid-south HortScience 43 609. (abstr.)

    • Search Google Scholar
    • Export Citation
  • Slattery, E., Livingston, M., Greene, C. & Klonsky, K. 2011 Characteristic of conventional and organic apple production in the United States. U.S. Dept. Agr. Econ. Res. Serv. FTS-347-01. 7 Jan. 2014. <http://www.ers.usda.gov/media/118496/fts34701.pdf>

  • Smith, T.A., Huang, C.L. & Lin, B.H. 2009 Does price or income affect organic choice? Analysis of U.S. fresh produce users J. Agr. Appl. Econ. 41 731 744

    • Search Google Scholar
    • Export Citation
  • U.S. Department of Agriculture 2002 United States standards for grades of apples. 8 Jan. 2014. <http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5050339>

  • U.S. Department of Agriculture 2012 2011 Certified organic production survey. 27 Jan. 2014. <http://usda01.library.cornell.edu/usda/current/OrganicProduction/OrganicProduction-10-04-2012.pdf>

  • U.S. Department of Agriculture 2013a Organic production: Table 3. Certified organic and total U.S. acreage, selected crops and livestock, 1995-2011. 28 Jan. 2014. <http://www.ers.usda.gov/Data/Organic>

  • U.S. Department of Agriculture 2013b U.S. apple statistics: Table 7 - Yield per apple bearing area in the United States, by State, 1980-2010. 19 Dec. 2013. <http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1825>

  • U.S. Department of Agriculture 2014a Advertised prices for fruits & vegetables at major retail supermarket outlets. 01/04 to 01/16. 10 Jan. 2014. <http://www.ams.usda.gov/mnreports/fvwretail.pdf>

  • U.S. Department of Agriculture 2014b Price indexes and discount rates: Use of the discount rate in conservation programs and projects. 28 July 2014. <http://www.nrcs.usda.gov/wps/PA_NRCSConsumption/download?cid=stelprdb1257183&ext=pptx>

  • U.S. Department of Labor 2014 News release – Consumer price index – Dec. 2013. USDL-14-0037. 23 Jan. 2014. <http://www.bls.gov/news.release/pdf/cpi.pdf>

  • Wang, Q., Sun, J. & Parsons, R. 2010 Consumer preferences and willingness to pay for locally grown organic apples: Evidence from a conjoint study HortScience 45 376 381

    • Search Google Scholar
    • Export Citation
  • Yue, C., Gallardo, R.K., Luby, J., Rihn, A., McFerson, J.R., McCracken, V., Bedford, D., Brown, S., Evans, K., Weebadde, C., Sebolt, A. & Iezzoni, A.G. 2013 An investigation of U.S. apple producers’ trait prioritization: Evidence from audience surveys HortScience 48 1378 1384

    • Search Google Scholar
    • Export Citation
  • Yue, C. & Tong, C. 2009 Organic or local? Investigating consumer preference for fresh produce using a choice experiment with real economic incentives HortScience 44 366 371

    • Search Google Scholar
    • Export Citation
  • Yue, C. & Tong, C. 2011 Consumer preferences and willingness to pay for existing and new apple varieties: Evidence from apple tasting choice experiments HortTechnology 21 376 383

    • Search Google Scholar
    • Export Citation
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